Last update on 2024-06-07

Innodata (INOD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Explore Innodata (INOD) in 2023 through the Piotroski F-Score Analysis, scoring 7/9. Assess profitability, liquidity, and operational efficiency with us.

Short Analysis - Piotroski Score: 7

We're running Innodata (INOD) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score helps investors find strong, undervalued stocks. The score ranges from 0 to 9, and it's based on 9 criteria for profitability, liquidity, and leverage. Innodata (INOD) was analyzed and scored 7 out of 9 for 2023. Highlights include positive cash flow ($5,903,000) and improved returns on assets, but the company had a negative net income of -$908,000 and experienced share dilution, impacting existing shareholders negatively. Their leverage has also increased slightly, raising concerns. Key strengths lie in liquidity and operational efficiency, signaling potential for improving profitability.

Insights for Value Investors Seeking Stable Income

Innodata (INOD) has a Piotroski score of 7, which is quite strong. Despite some negative aspects, like a recent net income loss and increased leverage, its cash flow and asset returns are improving. Given its strengths in liquidity and operational efficiency, it may have potential for profitability. It could be worth considering for investment, but further detailed analysis and monitoring of its financial health are recommended.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Innodata (INOD)

Company has a positive net income?

Net income is a critical measure of a company's profitability, reflecting its ability to generate profit after subtracting all costs and expenses from total revenue.

The net income for Innodata (INOD) in 2023 was -908,000, indicating a loss. Over the past 20 years, the company's net income has shown considerable volatility. For example, it peaked in 2004 with a net income of 7,857,000 but hit a severe low in 2012 with a net loss of -10,632,000. This inconsistency in delivering positive net income suggests persistent challenges in profitability, as evidenced by the negative net income in the most recent year, 2023. Consequently, Innodata (INOD) earns 0 points on this criterion for 2023, signaling a negative trend for this factor.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is critical in the Piotroski analysis as it indicates the liquidity position of a company. Positive CFO demonstrates a company’s ability to generate cash from its core business operations, highlighting operational efficiency and the potential to fund ongoing activities without relying on external financing.

Innodata (INOD) has a positive CFO of $5,903,000 for the year 2023, which earns it 1 point as per the Piotroski analysis criteria. Over the past 20 years, Innodata has experienced fluctuations in its operating cash flow, with several years showing negative values, such as -$3,454,000 in 2006 and -$2,980,000 in 2011. The positive trend in CFO for 2023 is favorable, demonstrating improvements in operational efficiency. Given that out of the last 20 years, 14 years reported positive CFO, this trend supports the company's strengthening financial health and underscores its capacity to generate sufficient cash from operations.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): A higher ROA indicates better efficiency in using assets to generate earnings. Comparing such changes can reveal improvement.

The Return on Assets (ROA) for Innodata (INOD) has improved from -0.2225 in 2022 to -0.0169 in 2023. This marks a significant positive trend in the company’s ability to utilize its assets efficiently, even though the ROA is still negative. Overall, this improvement is a promising sign, reflecting a move towards profitability. Considering the historical performance of the ROA in the last 20 years, these values show that while the industry median ROA hovers around +0.3, Innodata's gradual upward trajectory from a very low base warrants recognition.

Operating Cashflow are higher than Netincome?

This criterion assesses if a company's operating cash flow exceeds its net income, which can indicate strong earnings quality.

In 2023, Innodata (INOD) reported an operating cash flow of $5,903,000 and a net income of -$908,000. This results in the operating cash flow being significantly higher than the net income. Historically, over the past 20 years, the company's operating cash flow has generally moved independently of net income, with both showing periods of positive and negative values. However, in the more recent years leading up to 2023, operating cash flow tended to be positive more frequently. The result for 2023 suggests a strong earnings quality as the company is generating cash above its net income level, indicating healthy operational efficiency. Thus, this criterion scores 1 point.

Liquidity of Innodata (INOD)

Leverage is declining?

Change in Leverage examines whether a company has increased or reduced its financial obligations compared to its equity. Lowering leverage is often seen as positive, indicating reduced financial risk.

The Leverage for Innodata (INOD) increased from 0.084 in 2022 to 0.0791 in 2023, which demonstrates a rise. Over the past 20 years, leverage has fluctuated but has generally stayed in a manageable range. However, recent trends indicate slight increases in leverage. This trend means increased financial obligations relative to equity, which could be a red flag for potential investors. Hence, the leverage criterion scores 0 points in the Piotroski F-Score analysis.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates stronger liquidity and financial health.

The Current Ratio for Innodata (INOD) increased from 1.1378 in 2022 to 1.3986 in 2023, reflecting an improvement in the company's ability to cover its short-term liabilities. This marks an upward trend, which is beneficial as it indicates better liquidity. Historically, Innodata's Current Ratio has decreased significantly from 2013's 3.9626. That being said, the company's Current Ratio is still low compared to its earlier years and closely aligned with the industry median of 1.4169 in 2023, slightly below. Therefore, while this improvement is good, Innodata still lags behind its historical liquidity performance. Hence, a score of 1 point is awarded.

Number of shares not diluted?

Change in shares outstanding considers the dilution or concentration of current shareholders' equity.

The outstanding shares of Innodata (INOD) increased from 27,278,000 in 2022 to 28,131,000 in 2023, indicating a dilution rather than concentration. The increase suggests either new capital raisings or exercise of stock options, impacting the existing shareholders negatively as their ownership is diluted. Therefore, for this criterion, no point is given.

Operating of Innodata (INOD)

Cross Margin is growing?

The Change in Gross Margin criterion assesses whether a company's profitability has improved over the previous year, adding stability to its financial health.

The Gross Margin for Innodata (INOD) has increased from 0.3477 in 2022 to 0.3606 in 2023. This is a positive trend, indicating an improvement in profitability as the company retains more revenue per dollar of sales. The addition of 1 point for this criterion suggests a strengthening position in the competitive landscape. Over the past 20 years, Innodata's Gross Margin has fluctuated significantly, with peaks in 2004 (0.3874) and 2021 (0.3765). In comparison to the industry median Gross Margin of 0.3391 in 2023, Innodata's 0.3606 shows it is performing above average. This improvement can be seen as a positive indicator of operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue.

Innodata's Asset Turnover ratio for 2023 stands at 1.6148, an increase from 1.4731 in 2022. This uptick signals improved efficiency in asset utilization to generate revenues. Looking at the historical data over the last 20 years, 2023's ratio nears its historical high of 1.9696 (2007). This long-term view exhibits periods of fluctuation but an overall positive recent trend. Given this increase, we add 1 point for the Asset Turnover criterion, indicating a favorable trend.